Reconstruction Fund (EU)

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The reconstruction fund ( French Fonds de Relance , English Recovery Fund ) is a Franco-German initiative that was presented on May 18, 2020. The fund should have a volume of 500 billion euros. After all EU members have given their approval, the European Commission can borrow money through joint European bonds on the capital market and, in addition to the EU budget, in the next three years to regions and economic sectors that are particularly affected by the economic crisis associated with the COVID-19 pandemic (EU)have been damaged, pay out non-repayable grants. In the long term, repayment will be made through the EU budget. With regard to liability, it is provided that each country is only liable for its share of the reconstruction fund.

What is new about the proposal is the fact that for the first time the EU as a whole is going into debt. The implementation decided by the European Council gives the EU a new financing instrument. The project has yet to be approved by the European Parliament.

History of origin

Previous debate

In the previous debate, politicians from France, Italy and Spain took the position that a European Union's reconstruction fund should provide grants in addition to the European Central Bank's ongoing Pandemic Purchase Program (PEPP) , while politicians from Germany and the Netherlands should provide loans preferred. This should be financed through so-called "corona bonds", analogous to the euro bonds from the time of the euro crisis .

suggestion

On May 18, 2020, Angela Merkel and Emmanuel Macron proposed this fund at an online press conference from Berlin and Paris. According to newspaper reports, a major reason for the German government's change of opinion on the question of whether loans or grants should be granted was the decision of the Federal Constitutional Court on May 5, 2020 with regard to the European Central Bank.

Counter proposal

Austria, Sweden, Denmark and the Netherlands published a counter-proposal, the main difference being that the money should be given to the member states in the form of cheap loans.

European Commission proposal

Ursula von der Leyen spoke on May 13, 2020 at the plenary session of the European Parliament about a plan for the reconstruction of the economy. She mentioned that the European Parliament has a say in an EU program for reconstruction. The plan is to have “three pillars”: 1) The bulk of the funds will be spent under the European Semester to fund major public investments and reforms, supporting the transition to a “climate neutral, more digital and resilient Europe”. 2) More economic growth and private investment, with von der Leyen mentioning the planned InvestEU fund , which is expected to trigger more than EUR 650 billion in additional investments across the EU from 2021 to 2027, and a new instrument for strategic investments (e.g. for investments in the pharmaceutical sector). 3) Programs that have proven themselves during the crisis are to be funded.

On Wednesday, May 27, the von der Leyen Commission proposed a reconstruction fund (“Next Generation EU”) of 750 billion euros, which should consist of 500 billion euros in grants and 250 billion euros in cheap loans for the member states. The fund is part of the Multiannual Financial Framework (MFF), the European Union's budget of at least five years from 2021 . According to the Commission, the money should not be repaid before 2028 and not after 2058. It could be raised through additional income, such as the expansion of EU emissions trading to include shipping and air traffic, a border adjustment measure (English: Border Carbon Adjustment ; when trading with countries with lower or no CO 2 prices, imported goods with a CO 2 adjustment fee will be charged, while goods exported from the EU will be relieved), a digital tax and other options. This proposal was submitted to the European Council for decision.

Result of the negotiation of the European Council

The 27 EU governments have chosen not to change the total of 750 billion euros. Under pressure from Austria, Sweden, Denmark, the Netherlands and Finland, it became suitable to spend 390 billion euros in grants and 360 billion euros in the form of repayable loans. It was also agreed that the funds should be linked to reforms. Should a government suspect that a state is not adequately fulfilling its reform obligations, it can trigger a mechanism for checking, which ultimately stops further payments to the accused country. Furthermore, the premium discounts in various countries have been increased instead of abolishing them, as the EU Commission is striving for.

The reconstruction fund will initially be financed through the issue of new debt bonds by the EU as the issuing body. These debts are to be paid off gradually from 2027 to 2058. Among other things, a plastic and CO 2 border tax that has yet to be introduced was decided on at EU level. Since the EU commits the debts, but does not itself assume liability, the member states are ultimately the guarantors. It was therefore decided that each country would only be liable up to its own share of the EU budget. For Germany that would be up to 27% of the approved 750 billion euros. This corresponds to 202.5 billion euros in the event that the repayment by the EU does not go as planned.

Discussion of the detailed questions

Various proposals for the distribution of the funds from the fund were put forward, the Center for European Economic Research showed various approaches in mid-May 2020:

  • Southern European countries therefore preferred a distribution according to the level of the recession - the collapse of the gross domestic product in 2020. Austria, Luxembourg and Poland would be the countries that would be relatively most affected.
  • According to the analysis, Eastern European countries would demand a distribution including unemployment figures. Germany, Denmark, Austria and Luxembourg, measured by their GDP, bear the greatest burdens.

Bruno Le Maire , French Minister for Economic Affairs and Finance, said on May 19 that after the French government's presentation , support should be given to the aerospace industry , car manufacturers and tourism.

classification

Werner Mussler speculated in the FAZ that the two heads of state also want to use the instrument to establish a new European budget and financial architecture. Ulrich Ladurner referred in the ZEIT on a ban in the EU Treaties, may not raise its own debt, according to the institutions of the EU - which would make a reform of the EU treaties required. One goes in the direction of communitisation of the debt.

The economist Daniel Stelter noted that the average private wealth in Italy and Spain, according to data from 2019, was significantly higher than that in Germany and that the tax burden in both countries was significantly lower. In this way, the two states could access the assets of their citizens instead of being financed by other EU states. However, this option is not being discussed in Italy and Spain.

Web links

Individual evidence

  1. ↑ Christoph Prantner, Berlin: “Mercron” plan: Hardly any criticism of EU reconstruction funds . In: Neue Zürcher Zeitung . ( nzz.ch [accessed on May 26, 2020]).
  2. ↑ a b c "We pulled us together" - EU summit agrees on historic Corona package world of July 21, 2020
  3. ↑ Deutsche Welle: Coronavirus: France, Germany propose € 500 billion recovery fund. May 18, 2020, accessed May 24, 2020 (UK English).
  4. ^ Victor Mallet (Paris), Guy Chazan (Berlin), Sam Fleming (Brussels): The chain of events that led to Germany's change over Europe's recovery fund. In: Financial Times. May 22, 2020, accessed on May 24, 2020 .
  5. ↑ WORLD: Merkel-Macron-Plan: The “thrifty four” present an alternative . In: THE WORLD . May 23, 2020 ( welt.de [accessed May 27, 2020]).
  6. ↑ InvestEU. In: European Council. Retrieved May 25, 2020 .
  7. ↑ Speech by President von der Leyen at the plenary session of the European Parliament on the new MFF, own resources and the plan for the reconstruction of the economy. In: European Commission . May 13, 2020, accessed May 25, 2020 .
  8. ^ Speech by President von der Leyen at the European Parliament Plenary on the EU Recovery package. European Commission , May 27, 2020, accessed on May 27, 2020 .
  9. ↑ Europe's moment: Repair and prepare for the next generation. European Commission , May 27, 2020, accessed on May 27, 2020 .
  10. ^ Financing the Recovery plan for Europe. European Commission , May 27, 2020, accessed on May 27, 2020 .
  11. ↑ tagesschau.de: What the EU summit decided. Retrieved July 21, 2020 .
  12. ↑ Daniel Stelter, manager magazin: Reconstruction funds: Germany and France put prosperity at risk - manager magazin - politics. Retrieved July 21, 2020 .
  13. ↑ a b c Tobias Kaiser: "This bill shows where the Merkel-Macron billions are going" welt.de of May 25, 2020
  14. ↑ EU recovery fund should support aerospace sector: France's Le Maire . In: Reuters . May 19, 2020 ( reuters.com [accessed May 24, 2020]).
  15. ↑ Ulrich Ladurner: "The debate about an EU reform gets new momentum" Die Zeit from May 24th, 2020
  16. ↑ "Of course we have to help Italy - but intelligently" manager-magazin.de of April 4, 2020